Vendor Agreement Drafting

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Vendor Agreement Drafting

AVendor Agreement is an agreement stipulating the conditions under which the work is to be performed by the vendor. It is a comprehensive agreement covering various aspects such as the quality of goods supplied or service provided, duration of the contract, terms and mode of payment. Such an agreement would be useful to those hosting a large event (a trade exhibition, for example) where several vendors will be selling their wares.

Advantages of Vendor Agreement Drafting

A well-drafted Vendor Agreement will minimise risk of future litigation, as the rights and duties of both parties are clearly laid down in the agreement.

The agreement can be made to specify exactly how the vendor is to work. On the other hand, the vendor may have it specify the space to be allotted, any amenities available to him and the mode of payment.

Five things to consider in a Vendor Agreement

Type of sale

If the agreement says anything other than “true sale,” the risk of sell-through is borne by you, the supplier. “Guaranteed sale” means that unless the product sells within an acceptable time period. A true sale means that purchasing the product from you and is obligated to pay you whether they sell it or not.

Terms

Invoices that are outstanding for 90 days or more are difficult for factoring companies to fund, and banks won’t include those invoices in their margin calculation.





Discounts

Since cash flow is critical for small business owners, many companies opt to include early payment discounts in their vendor agreement.






Shipping and Delivery

The shipping terms determine when you are able to invoice your customer and start the clock on the agreed terms. Shipping terms also determine when your liability ends and the goods become the property and responsibility of your customer.


Remittance details

Upon setting up an account with a customer and receiving a vendor number, you will be asked to submit remittance details (where payment should be made) and form of payment (cheque or direct deposit/EFT).


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